Research Articles Base: Kentucky Fried Chicken Case Studies

Kentucky Fried Chicken and the global fast-food industry

Kentucky Fried Chicken and the Global Fast-food Industry   Introduction: YUM Brands YUM Brands, Inc. formerly known as TRICON Global Restaurants, Inc. is located in Louisville, Kentucky. TRICON Global was formed from Pepsi Company when it was spun off on May 7, 2002 (which included Pizza Hut, Taco Bell and KFC). After the acquisition of Long John Silvers and A & W, on May 7, 2002 TRICON Global Restaurants formerly changed their name to YUM to reflect its expanding portfolio of restaurants and its ticker symbol on the New York Stock Exchange. Yum Brands is the worldwide leader in multibranding, which offers consumers more choice and convenience at one restaurant location. Today YUM is the world’s largest quick service restaurant (QSR) company based on the number of system units, with nearly 33,000 restaurants in over 100 countries, with 1,975 of them multibranded world wide. YUM is made up of six operating companies, which include: KFC, Pizza Hut, Taco Bell, Long John Silvers, A & W and YRI (YUM Restaurants International). YUM is organized around five restaurant concepts, which are KFC, Pizza Hut, Taco Bell, Long John Silvers and A & W. Instead of competing directly with McDonald’s or Chili’s, Yum! Brands’ three different businesses – KFC, Taco Bell, and Pizza Hut – target three nonhamburger segments of the restaurant industry. KFC offers its traditional, distinctive-tasting fried chicken recipes, along with its golden rotisserie-cooked chicken and the growing health-conscious segments. Taco Bell seeks to carve out a position in the growing Tex-Mex fast-food segment. Pizza Hut has traditionally competed by offering restaurant-style, sit-down pizza meals (, 2003).   Kentucky Fried Chicken (KFC) KFC was founded in 1955, by  who developed his secret 11-spice recipe and method of pressure frying chicken. At the year end of 2002, KFC was the leader in the U. S. Chicken QSR segment with a 46 percent market share. At the end of 2002 KFC had 5,472 units in the U.S. and 6,890 units outside the U.S. Approximately 23% of the U.S. restaurants and 22% of the non-U.S. restaurants are owned by YUM. KFC restaurants offer fried chicken under the names Original Recipe, Extra Tasty Crispy. Other entrée items include chicken sandwiches, the Twister, crispy strips, popcorn chicken, chicken pot pies. KFC side items include biscuits, mashed potatoes, gravy, coleslaw, corn, macaroni, potato wedges, French Fries (outside the U.S.) and deserts ( 2003).   Potential Synergies Synergy according to  and  (1998), aims at achieving the fullest possible fit between firms. It is the policy best suited to optimizing bonding between alliance partners as well as to promoting learning between them. The idea of synergy is that the whole is greater than the sum of its part. The key idea of this policy is that the positive aspects of the various cultures are preserved, combined, and expanded upon to create a new whole (). In the mid-1970s, PepsiCo started buying fast-food chains to leverage its growth and hoping to provide synergies as outlets for its soft drink and snack products. The first acquisition occurred on November 7, 1977, when PepsiCo merged Pizza Hut Inc. into the company’s restaurant subsidiary through the exchange of PepsiCo’s capital shares for each Pizza Hut common share. On June 20, 1978, the company merged Taco bell into a subsidiary through the exchange of 1.43 PepsiCo’s capital shares for each Taco Bell common share. The exchange was valued at about 8 million. PepsiCo continued its restaurant investment by acquiring Kentucky Fried Chicken for approximately 1 million in cash on October 1, 1986 (). After the acquisition of KFC, PepsiCo started selling its products in all KFC restaurants. KFC on the other hand, gained access to PepsiCo’s management expertise. PepsiCo relocated its marketing skills through the repositioning of PepsiCo’s marketing managers to the headquarters of KFC. The products of KFC were advertised alongside with those of PepsiCo’s products.   Added Value that PepsiCo brought to KFC The added value that PepsiCo brought to KFC were its marketing prowess, low-cost source of beverages, shared advertising expenditures, and shared management. The acquisition of KFC by PepsiCo has provided KFC with heavy and sufficient amount of financial back up. Inexpensive advertising is consistent with PepsiCo’s image. Under the management of PepsiCo, KFC experienced a continuous growth both in the domestic and international markets. Among PepsiCo’s core competencies were significant financial resources, celebrity endorsements, ability to create new and innovative product, and ability to build and keep brand equity. Branding and new product innovations are considered as the core competencies of PepsiCo. Branding is important for PepsiCo. Its products are competing in a market where differentiation is hard to achieve without brand differences. PepsiCo uses its brand equity and celebrity endorsements to create value for its customers. KFC products were advertised alongside with Pepsi-Cola products. This strategy resulted in the advertising economies of scale and a better image for KFC.   PepsiCo’s Acquisition of KFC In 1986, KFC was acquired by PepsiCo. PepsiCo at the time was trying to widen its restaurant segment. Before acquiring KFC, PepsiCo has made previous acquisitions – Pizza Hut and Taco Bell. PepsiCo has a consumer product orientation. PepsiCo found out that marketing fast food is similar to the marketing of its products like soft drinks and snack foods. In the late 1970s. PepsiCo, manufacturer of Pepsi Cola and other soft drinks, began considering ways to increase fountain sales for its soft drink line because fountain drinks have a much higher margin than do either grocery sales or vending machine sales. A solution that PepsiCo implemented was to acquire several fast-food outlets –Taco Bell, Pizza Hut, and KFC – as a way to ensure exclusivity of its products. Acquiring these new outlets added to Pepsi’s fountain sales. However, it also causes damage to PepsiCo. Several large fast-food chains, including McDonald’s signed exclusive agreements with Coca-Cola, Pepsi’s primary and bitter competitor. These agreements were viewed as responses to Pepsi’s moving downstream in the channel and becoming their competitor. From the compound relationship perspective, PepsiCo started out in a simple supplier relationship with fast-food outlets. When the company bought Taco Bell, Pizza Hut, and KFC, it then became a supplier and a competitor of all the fast-food outlets it did not own. As a result, a long-time customer, such as McDonald’s no longer wanted to buy cola from a competitor, so it bought from Coca-Cola. Twenty years later, Pepsi sold its retail fast-food businesses to be in a better position to sell its soft drinks at other restaurants. Adding a new relationship with the fast-food companies led to the loss of a previously important relationship with several of them (. and  2007).   When Yum! Brands was part of PepsiCo, restaurants were just one portion of a larger company that also includes Frito-Lay snacks and its traditional soft drinks. Senior management at PepsiCo were asking themselves how well did their various restaurant businesses fit with their other snack food and soft drink units. PepsiCo’s management faced the additional task of ensuring that the restaurant business work well with its beverage and snack food units. Throughout much of the 1980s and 1990s, the restaurant business was an important part of PepsiCo’s overall strategy. Increasing competitive pressures and slowing down of the restaurant industry’s overall growth rate, however, made it increasingly difficult for PepsiCo to compete effectively in the industry. The strategic benefits that PepsiCo could once bring to the restaurant industry – marketing prowess, low-cost source of beverages, shared advertising expenditures, and shared management – became difficult to sustain when PepsiCo’s beverage business began to lose significant market share to arch rival Coca-Cola, especially in markets in the United States. By the mid to late 1990s, severe competition and declining profit margins on both fronts – beverages and restaurants – made it increasingly difficult for PepsiCo to compete effectively in both businesses simultaneously. Deciding that it needed to sharpen its competitive focus and to raise capital for its beverage business, PepsiCo’s senior management decided to sell its restaurant operations as a way to exit the restaurant business ().   Conclusion PepsiCo acquired Kentucky Fried Chicken in 1986, primarily to expand its quick service restaurant arm and to increase its soft drinks sales. PepsiCo bought restaurants in order to provide synergies as outlets for its soft drink and snack products. PepsiCo brought different added value to KFC through its acquisition. KFC benefited from the management and marketing expertise of PepsiCo. Other added values that PepsiCo brought to KFC were low cost of beverages, shared advertising expenditure, and shared management. In addition, KFC also had a sufficient financial back up from PepsiCo to expand internationally, particularly in China. KFC benefited from PepsiCo’s core competencies such as significant financial resources, celebrity endorsements, ability to create new and innovative product and ability to build and keep brand equity. However, PepsiCo faced many challenges both domestic and international that led the management to give up Pizza Hut, Taco Bell and KFC in 1997. PepsiCo’s acquisition of KFC, Pizza Hut and Taco Bell resulted in a competition against McDonald’s –which was a long-time customer for Pepsi Cola.  Increasing competitive pressures and slowing down of the restaurant industry’s overall growth made it difficult for PepsiCo to compete effectively in the industry. The added value that PepsiCo brought to KFC, Pizza Hut and Taco Bell became harder to sustain when PepsiCo started to lose significant market share to its bitter competitor, Coca Cola. PepsiCo decided to sell its restaurant operations because it needed to sharpen its competitive focus and to raise capital for its beverage business. Overall, I can say that the acquisition of KFC by PepsiCo has its advantages and disadvantages. It was successful at first. However, the competition and different challenges made PepsiCo to rethink its strategy. Keeping KFC and other restaurants would damage PepsiCo in the long run. I think that the acquisition was successful but the spin off was the better strategy for both KFC and PepsiCo.             References   Credit:ivythesis.typepad.com

Kentucky Fried Chicken and the global fast-food industry

Kentucky Fried Chicken and the Global Fast-food Industry Introduction: YUM Brands YUM Brands, Inc. formerly known a...

How KFC Macro Environment has influenced its Marketing Decision Making for last 12 Months and Next 12 months

How KFC Macro Environment has influenced its Marketing Decision making for last 12 Months and Next 12 months Kentucky Fried Chicken (KFC) has a mission of selling food in fast and friendly atmosphere that would appeal to the health conscious minds of the customers.  In addition to that, the fast food company has primary objectives in doing food business to their international consumers; and that are to develop food products that would certainly entice the meticulous taste of the customers. At the same time, is to increase the variety on their menu; and to introduce desert menu as well in a buffet restaurants.  The targeted markets of KFC are international consumers who prefer to eat fresh vegetables, macaroni and cheese, peach cobbler with red beans and rice. On the other hand, there are menu items that are especially intended for the Hispanic consumers in specific cities that serves fried plantains, flan and Tres Leches.  The food company target market location includes shopping mall food courts, universities, hospitals, airports, stadiums, amusement parks office buildings and mobile branches.  When it comes to marketing strategy in increasing their revenues and profitability; KFC has been working seriously to maintain the reduction of the company’s overhead expenses.  In the same manner, the organization also focuses on the improvement and efficiencies in the employees’ performance and customer service.  The food company also observes closely the cleanliness and proper sanitation of all the restaurant outlets worldwide; and, continuous production of high quality food products for the international consumers.  Aside from that, the company has still finding effective solutions on how to resolve franchise problems in the United States.  The company at present is thinking of doing additional expansion of its franchises in Mexico and beyond Central America. In achieving overall sales growth and profit increase.  The present management is also doing promotional international strategies through promoting healthier image of their food brand ; at the same time, to  improving  its  menu items. (http://www.fundinguniverse.com/company-histories/KFC-Corporation-Company-History.html) Kentucky Fried Chicken (KFC) has been evolved through several management and organizational changes such as changes of ownership that first took place in 1964 when Colonel Sanders sold it to a small group of investors.  Then, another several changes of ownership still occurred after that.  Finally, 1986, KFC was acquired by PepsiCo, which currently operates Taco Bell, Pizza Hut and of course the KFC.  Fortunately, under the management of PepsiCo, KFC has begun to operate 4, 258 restaurants in 68 countries worldwide.  And, at present, KFC is considered the largest chicken restaurant; and the third largest food chain in the globe.  In relation to this present situation of KFC, the new organization is structuring two divisions under PepsiCo. And, with the new organization, new set of company officers are being assigned to achieve effective implementation and execution of all marketing strategies that would definitely bring outstanding success to the food chain.   David Novak is the president of KFC, while John Hill is Chief Financial Officer and Colin Moore is the head of Marketing.  Peter Waller is the head of Franchising; and Olden Lee is head of Human Resources.  (http://www.fundinguniverse.com/company-histories/KFC-Corporation-Company-History.html) Furthermore, there is another marketing strategy that KFC is presently adapting now; and that is the improvement and development of the operational efficiencies and effectiveness.  The management strongly believes that there will be a great impact to this new operational implementation to the increase of the revenue of the firm.  Aside from that, modification of the KFC’s crew training programs and operating standards among its employees have been developed and implemented.  Subsequently, employment reduction took place among 250 of the 1500 management positions at corporate level; and the company just allowed the restaurant franchises and the marketing managers to do the job in the different countries.  Having all these in mind, nowadays, KFC generates a remarkable increase of its worldwide sales.  KFC has also met the changing demands of the modern society in the world.  It has developed into a more healthy living food chain with many new changes on its menu such as Honey BBQ Chicken, Popcorn Chicken, Rotisserie Chicken and has also started to serve its lunch and dinner buffets. (http://www.answers.com/topic/kfc-corporation) Correspondingly, there are a lot of business opportunities that KFC sees for the next 12 months in the Mexican market; since there is a new franchise law in Mexico for fast food chains expansion.  If this happens,   it offers a large customer base that has fewer competitors than the US market. In the same fashion, dual branding helps the company to appeal to the more diversified customer base that will provide higher income to the company.  Next is the possible higher increase of their international revenue in Australia, since it has been the KFC’s largest food chain market in the globe at present time.   (http://www.answers.com/topic/kfc-corporation)  References: (http://www.fundinguniverse.com/company-histories/KFC-Corporation-Company-History.html) (http://www.fundinguniverse.com/company-histories/KFC-Corporation-Company-History.html) (http://www.answers.com/topic/kfc-corporation)  (http://www.answers.com/topic/kfc-corporation)     Credit:ivythesis.typepad.com

How KFC Macro Environment has influenced its Marketing Decision Making for last 12 Months and Next 12 months

How KFC Macro Environment has influenced its Marketing Decision making for last 12 Months and Next 12 months Kentucky Fried Chicken (KFC)...

Managing Markets: Case of KFC

MANAGING MARKETS   Marketing mix modeling is a term of art for the use of statistical analysis such as multivariate regressions on sales and marketing time series data to estimate the impact of various marketing tactics on sales and then forecast the impact of various marketing tactics on sales and then forecast the impact of future sets of tactics.(1) Various companies have been using MMM or marketing mix modeling as part of their “secret formula” and most of them have been succeeding and their businesses are expanding. But one of the most notable among these companies is KFC, a leading food chain globally.  What kind of good strategies that we observe in the KFC that we don’t usually see in the other food markets?  First and foremost is, the way the marketing mix modeling is being implemented in all their branches and outlets.  Second is, the optimizing of budget by allocating spends to those activities which give the highest return on investment.  If we look closely on the first aspect, strategists have been gaining competitive advantage for KFC due to the fact that almost all corners of the world have this company which specializes in serving tasty and crunchy chicken, spaghettis and many more.  Of course, logic would tells us that if KFC is not well-received in one place, automatically its aura and salability to other places would be put into jeopardy.  But this would not be true to a company such as KFC, where the theory on how to be more competitive and uplift more its service to the people are at the forefront.  However, all these means of implementing marketing mix theory would be in vain if the strategist or marketing managers cannot and don’t know how to implement them prudently and wisely.  The time-frame and venues are of vital parts in considering the effectiveness of every business.  In the early 80’s a certain appliance  company was at the peak of its popularity and almost all people would patronize its name and bought their appliances no matter how costly they are as long as they carry with them the brands name.  Yet, and perhaps due to the marketing managers and strategists’ inability to foresee the future and the consideration of the place, the once famous company went into bankruptcy and suddenly disappeared like bubbles in the air.  Talking about venues and time-frame as great tools in safeguarding the salability and consistency of the market, KFC (most specific example is the Philippines), I should say, has been gaining advantage over the other food chain companies.  And why is this so?  Firstly, the strategists know full well that the Filipinos are grossly in love with eating fried chicken and other pastas as well.  The strategists here considered two salient points: venues and time-frame.  Venue because, Filipinos are fried-chicken loving country.  And this “addiction” cannot be separated from them.  Time frame because, eating fried chicken is something that endures for lifetime.  The second aspect hinges on these: forecast sales, simulating various scenarios, identifying the most and least efficient marketing activities, mix promotional tactics (2), have also contributed to the effectiveness of putting into practice  the theory of marketing mix.  The effectiveness of each of the marketing elements is defined in terms of its contribution to sales-volume, effectiveness, efficiency ROI (return on investment).  These insights are then utilized and acquired to adjust marketing tactics and strategies.  To optimize the marketing plan and also to visualize sales while simulating various scenarios is not just useful for reporting the established and experienced effectiveness of the activity, it also helps in visualizing the budget by identifying the most and least efficient marketing activities.  In this way, the marketing manager can reallocate this marketing budget in different proportions and see the direct impact on sales value.  At this point, the strategists or marketing managers can optimize the budget by allocating expenditure to those activities which give the highest return on investment.  In forecasting sales, the strategists employ the psychology of optimism.  Pessimistic attitude has no room in business because it does not only lowers the moral of the workforce, but it also puts the company into a false sense of security.  Being optimistic, marketing managers forecast sales so as to add more to the efficiency and contribution on sales-volume.  In identifying the least and most efficient marketing activities, the strategists can address effectively the problem.  The least efficient marketing activities can be done by checking the personnel and supervisor whether they are really doing their assigned tasks.  Secondly, by monitoring and consistently upgrading the more efficient ones, the marketing managers are doing a check and balance work which is important in raising the level of quality of the market.                The ultimate objectives of all the employed tactics and techniques in the market world revolve around the sales volume, effectiveness of the strategy , efficiency on return on investment.  And the best of these of course is, return on investment (and of course—the interest and how much you gain from your business). Footnotes: 1. Marketing mix modeling—WikiPedia                    2. Return on Investment–WikiPedia Credit:ivythesis.typepad.com

Managing Markets: Case of KFC

MANAGING MARKETS Marketing mix modeling is a term of art for the use of statistical analysis such as multivariate regressions on sal...

Managing Markets: Case of KFC

Managing Markets: Case of KFC

MANAGING MARKETS Marketing mix modeling is a term of art for the use of statistical analysis such as multivariate regressions on sal...

Discuss KFC’s Macro Environment has influenced in Marketing Decision Making for last 12 months

KFC MACRO ENVIRONMENT IMPACT ON ITS MARKETING DECISIONS             Kentucky Fried Chicken, now under Yum! Brands, Inc. has no lower than eleven thousand restaurants in eighty countries worldwide.  Next to McDonalds, it is the largest fastfood restaurant in the world.             One of the new products of KFC is the Double Down. It has no bread. Instead of bread, chicken breading serves as its substitute. In between the chicken breading, there are cheese, bacon and sauce. In KFC’s advertisement, the slogan used to promote the product is “(it) is so meaty, there is no room for a bun”.               The Toasted Pocketful was launched in Malaysia. Its ingredients are the zinger fillet, corn kernels, Chacho’s corn chips, lettuce and chicken strips that are crispy. On top is a jalapeno cheese sauce. It is then put in a tortilla, wrapped and toasted. Its aim is to start its products that are tortilla-based.             In its Malaysian operations,  a profit growth of twenty-five percent to RM35.6 million was recorded. The growth was attributed to expansion of an additional eight new branches and thirty-four outlets, the launching of novel products and services as breakfast menu and Triple XL burger, KFC’s marketing campaign associated with the 400th store set meals celebrations,  and a twenty-four operation by some outlets.             However, rising prices of necessities as cooking oil, poultry, flour, and potato products canceled some of the profits that were earned.             In Singapore, earnings were generated by an extension of eight new outlets, the nationwide marketing promotion called the Real Taste campaign, and the launching of Golden Fiesta Bucket Meal.             In Pakistan, KFC is concentrating on targeting the suburban middle class income families with products sold at affordable prices. Additional mobile outlets are soon to open to cater to these target markets where additional offerings of dessert are available. Hot Wing will be introduced to several key cities of Pakistan. Open cooking is known to be applied in some KFC outlets of Pakistan. This is to afford the customers to view how their food is cooked, and to assure them that KFC cooking is safe and hygienic. KFC have also introduced  promotion packages as Ramadan package, midnight package, birthday package, and celebrates other occasions as Basant day, Mother’s day, and others. They also launched KFC items as watches, mugs and coffee cups, toys, key chains, T-shirts, and offers lucky draw activities to entice more customers. It also has its own chatting and social site where it promotes and introduces its products.   It has its own mobile vane to be able to deliver orders within thirty minutes, and which serves also as a source of advertisement. Road shows are performed by KFC during campaigns and festivals.       It is aiming to open an additional forty more outlets around the country. In the city of Peshawar, KFC outlets are open twenty-four hours everyday and all products are available any time of the day or night.             While registering improved sales in its restaurants and outlets, the KFC segment is recording a decrease in its earnings. This is mainly due to the continuous increase of KFC’s prime raw commodities as soybean meal, corn, and palm oil. Its outcome is a much higher cost of producing internal poultry products. In addition, cost of ingredients was also on the rise as well as materials used in its packaging.             Due to this, the KFC group is concentrating to attain an improved cost efficiency method while improving productivity in its facilities, both the restaurants and manufacturers.             Marketing decisions were based on the following opportunities: enticing or targeting the youth market by putting up facilities with play stations, LCDs, Wi-Fi and making the outlet available for parties and events; promoting the hygiene of their chicken meat;  campaign on complementing home meals; improvement in its delivery logistics;  introduction of new products as fish, corns, salads, donuts, and others making it a totally balanced meal with every course available from soup, main dish to dessert o suit each customer’s taste and wants; and  positioning itself in South America.             On the other hand, KFC needs to study its pricing because its sale cost is higher than other fastfoods selling the same products or items; assess its packaging and its offers of promotional deals to customers; provide solutions to customers” requirement of healthy foods, and increase more their variety of products.   Credit:ivythesis.typepad.com

Discuss KFC’s Macro Environment has influenced in Marketing Decision Making for last 12 months

KFC MACRO ENVIRONMENT IMPACT ON ITS MARKETING DECISIONS Kentucky Fried Chicken, now under Yum! Brands, Inc. has no lower th...

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